Veteran charity accused of misusing funds

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Charity's executives used funds for country club memberships, condos, she says

CNN investigation in 2012 found donations to veterans were kits for paper airplanes

A year after CNN investigated a California charity that said it was helping veterans, the California Attorney General's office on Friday announced the charity would pay a $2.5 million fine and agree to the resignation of most of its principal officers because it had spent most of its donations on fundraising and what the state called "excessive compensation" for its executives.

Attorney General Kamala Harris said Help Hospitalized Veterans executives had "improperly diverted" donated funds to themselves as well as purchasing country club memberships and in one case a suburban Washington condominium for use of its officers.

"I am pleased that this settlement forces these officials to resign, in addition to paying restitution," Harris said in a statement.

When CNN investigated Help Hospitalized Veterans in August 2012, it found that most of the donations sent to veterans hospitals around the country amounted to so-called "craft kits" for recovering soldiers to use while hospitalized. The kits included instructions for making paper airplanes. Tax returns from Help Hospitalized Veterans showed six-figure salary payments to several of its key officers, including Chief Executive Officer Michael Lynch.

At the time, Lynch told CNN in a brief on-camera statement, "We hope these unproven allegations will not diminish the more than 40 years of service HHV has provided to our nation's most valuable treasure, our veterans. HHV looks forward to the chance to tell its story and we hope this action will not impede its ability to add its support to hospitalized veterans nationwide."

Help Hospitalized Veterans has been the subject of state and federal inquiries for several years. In 2008, a House Oversight Subcommittee hearing led by Rep. Henry Waxman, D-California, spent a day seeking testimony from the charity's founder, Roger Chapin, as well as other Help Hospitalized Veterans executives. Chapin died last month. Waxman told CNN in 2012 that in his view, executives of the charity "ought to be put in jail" because of excessive spending.

Help Hospitalized Veterans, which is based in Temecula, California, will not close, said Hugh Quinn, the charity's attorney. He said $500,000 of the fine will be paid by the charity. The remaining $2 million will eventually be paid from the estate of Chapin's wife, Quinn said. Lynch will retire after 35 years and will collect a pension of $160,000 per year, Quinn said.

In a written statement, Quinn said he saw the fine and settlement as a victory for Help Hospitalized Veterans. "As long as there's a need, HHV will be there and we're looking forward to reconnecting with veterans and their families and our supporters so that our work continues," he said